Ford Motor Company's (F) Big Move Brings Out Call Buyers

Ford Motor Company (NYSE:F) unveiled plans to build a plant in Mexico

by Karee Venema

Published on Apr 5, 2016 at 2:23 PM
Updated on Jun 24, 2020 at 10:16 AM

Despite criticism from Republican presidential candidate Donald Trump, Ford Motor Company (NYSE:F) said it will build a new plant in Mexico -- creating 2,800 jobs by 2020. While the news has done little to boost shares of the automaker -- F is trading 0.2% lower at $12.77 -- the stock's options pits are buzzing, with calls having a slight edge over puts.

By the numbers, roughly 20,000 call options have changed hands, compared to 18,000 put options -- on par with what's typically seen at this point in the day. Most active are F's January 2017 12.75-strike put and 14.75-strike call, where it looks as if a F shareholder may be initiating a collar.

Elsewhere, more traditional options traders are targeting F's June 13.75 call, which appears to be seeing some buy-to-open activity -- a theory echoed by data from the International Securities Exchange (ISE). In other words, these call buyers expect F to rally north of $13.75 by the time the options expire at the close on Friday, June 17.

More broadly speaking, put buyers have been dominant in F's options pits in recent weeks. At the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), in fact, the stock's 10-day put/call volume ratio of 1.70 is perched at an annual high.

The equity's April 13 strike has seen the biggest rise in open interest over that time frame -- thanks in part to one massive bet against the stock -- with 33,391 contracts added. F's April 11.75 put has also been popular, with 16,258 contracts added in the last two weeks, a hefty portion of which were bought to open. In other words, speculators expect F to breach the strike by next Friday's close, when front-month options expire.

On the charts, Ford Motor Company (NYSE:F) has been a long-term laggard, shedding one-fifth of its value over the past 52 weeks. However, today's pullback is being contained by F's 50-day moving average -- a trendline that has spent the majority of the last year working against the stock, but may be switching to a more supportive role.

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